The East End’s Peconic Bay Community Preservation Fund (CPF) revenues for the first four months of 2022 are 3.8% lower than the first four months a year ago, according to Assemblyman Fred W. Thiele, Jr., the fund’s architect. While there are economic concerns afoot, it’s not as alarming when looking at the figures historically, he said
The community preservation fund, which generates money from a 2% tax on all real estate transfers, yielded $72.31 million from January through April, down compared to the $75.17 million that was collected during the same period in 2021.
“Real estate activity is less than a year ago, largely due to the lack of inventory,” Thiele said. But, just because the COVID real estate boom may be over, that doesn’t mean it’s all bad news.
“It’s down from the peak, but it’s still higher than any other year,” Thiele said by phone last week. “Historically the market is a pretty healthy market, it just isn’t the super hot market it was during the pandemic,” when people were clamoring to buy real estate in the Hamptons.
“CPF revenues for 2022 still remain at historically high levels when compared to revenues before the pandemic,” he says. “Revenues for the first four months of 2022 are the second-highest in the 24-year history of the program.”
Looking just at the first quarter alone, it was the largest first quarter in the fund’s 23-year history, Behind The Hedges reported in May.
In the last 12 months, the CPF has generated $207.7 million. April marked the 21st consecutive month that revenues have exceeded $10 million. Since its inception in 1999, the preservation fund has generated $1.883 billion.
However, April 2022’s revenues compared year-over-year were also down, totaling $16.22 million, as compared with $19.95 million in 2021. It also marks the third consecutive month where CPF revenues were less than the corresponding month a year ago.
There are simply fewer transactions, Thiele says, but the luxury real estate market keeps pumping money into the community preservation fund. “There’s still a lot of transactions on the high end, on the luxury end,” he adds.
For instance, Suffolk County deed showed last week, that former TODAY host Matt Lauer sold his waterfront estate on Actors Colony Road for a combined $40.9 million in April.
What the East End’s CPF Means for the Overall Market
Even more concerning than the lack of inventory, are concerns over the substantial reduction in the stock market, inflation and increased interest rates. Thiele spoke to Behind The Hedges on the same day that the Federal Reserve again raised interest rates this year— by 0.75%, the largest increase since 1994 — though he says increased interest rates, have less of an impact on the high end of the market.
“From the time I was town attorney until now, the connection between real estate on the East End and the stock market — you can draw a pretty straight line between those two things,” he says.
Thiele points to 2019, when President Trump’s administration passed the tax bill and “wiped out SALT,” capping the tax deduction at $10,000. “That policy action by itself was enough to put a shiver through the East End real estate market. We had been averaging $90 million a year in the CPF. Then a year after, it dropped to the $70 millions, then corrected itself. And then the pandemic hit.”
“We went from $77 million to $210 million,” in CPF revenues, he says of that change. “People get used to that. Two years of that and people think that’s the way it should be always,” he adds.
Even with the dip in activity and the economic woes, Thiele does not think the East End is headed toward a major economic downturn, such as during the Great Recession. “I don’t think we’re headed towards 2009/2010,” he says. In 2007 the CPF collected $96 million. By 2009, the annual revenues went down to $56 million and dropped every further in 2010 to $40 million.
Looking at the figures for the first four months of 2022 compared with 2021, four of the five towns took in less than the same period in 2021. Riverhead Town was the exception, with a 51.9% increase in revenues from $2.33 million from January through April 2021 and $3.54 million during the same period this year.
The Town of Shelter Island took the biggest hit with a 34.8% decrease from $1.78 million in the first four months of 2021 and $1.16 million during that period this year.
Meanwhile, the Town of Southampton, which always takes in the most money, received $39.98 million in revenues during that period, down from $42.65 million last year, a change of 6.3%.
East Hampton Town’s revenues are down 2.6% from $23.54 million in 2021 to $22.92 million this year.
Lastly, the Town of Southold received $4.7 million during the first four months, 3.3% less than 2021, when it took in $4.86 million.